CHINA SHENGHUO PHARMACEUTICALS (GREY:CKUN)

First Quarter 2012 Results

• Total revenue was approximately $11.4 million for the first quarter of 2012, an increase of 20.5% from approximately $9.4 million for the same period of 2011.
• Gross profit as a percentage of revenues was approximately 58.9%, as compared to 59.7% for the same period of 2011.
• Net cash provided by operating activities for the three months ended March 31, 2012 was approximately $0.9 million, a decrease of approximately $1.7 million as compared to approximately $2.6 millionfor the same period of 2011.
• Net loss was $446,621 for the three months ended March 31, 2012 as compared to the net income of $85,701 for the three months ended March 31, 2011.

KUNMING, China, May 7, 2012 /PRNewswire-Asia-FirstCall/ -- China Shenghuo Pharmaceutical Holdings, Inc. (NYSE Amex LLC: KUN) ("China Shenghuo" or the "Company"), today announced its intent not to file Form 15 at this time and continue to be a reporting company until such time as it is allowed to suspend its reporting obligations.

In a Press Release dated April 20, 2012, the Company announced its intention to file a Form 15, which would, upon such filing, suspend the Company's obligations to file certain reports with the U.S. Securities & Exchange Commission (the "SEC"), including reports on Form 10-K, 10-Q,and 8-K. It was anticipated that such Form 15 would be filed on or about May 10, 2012, upon the effectiveness of the Form 25 - Notification of Removal from Listing and/or Registration under Section 12(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), filed in connection with the Company's voluntary delisting of its common stock from trading on NYSE Amex.

In discussions between the Company's legal counsel and the SEC, the SEC has taken the position that the exemption that the Company had sought to rely upon under Section 15(d) of the Exchange Act to suspend its reporting obligations is unavailable to it at this time. As such, the Company at this time will not file a Form 15, and it will continue to be a reporting company under Section 15(d) of the Exchange Act until such time as it is allowed to suspend its reporting obligations, which the Company expects to be no later than the first quarter of 2013. The Company therefore is preparing its quarterly report on Form 10-Q for the three months ended March 31, 2012, and expects to file it as soon as practicable.

KUNMING, China, April 21, 2012 /PRNewswire-Asia-FirstCall/ -- China Shenghuo Pharmaceutical Holdings, Inc. (NYSE Amex LLC: KUN) ("China Shenghuo" or the "Company"), today announced that on April 17, 2012, it received a deficiency letter (the "Deficiency Letter") from the NYSE Amex LLC ("AMEX") stating that the Company has resolved the continued listing deficiency with respect to Section 1003(a)(i) of the AMEX's Company Guide (the "Company Guide") referenced in AMEX's letter dated September 22, 2010.

However, as a result of the Company sustaining losses which are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of AMEX, as to whether such issuer will be able to continue operations and/or meet its obligations as they mature, the Company is no longer in compliance with Section 1003(a)(iv) of the Company Guide. The Deficiency Letter states that, in order to maintain its AMEX listing, the Company must submit a plan of compliance by May 1, 2012, advising AMEX how it intends to regain compliance with Section 1003(a)(iv) of the Company Guide by July 2, 2012. If the Company does not submit such a plan or if the plan is not accepted by AMEX, the Company would be subject to delisting procedures as set forth in Section 1010 and part 12 of the Company Guide.

In view of, among other things, the belief of the Board of Directors that under the Company's current circumstances, it is not reasonably practicable for the Company to establish and implement a plan of compliance that would satisfy AMEX's continued listing requirements, the substantial financial burden on the Company as a result of its status as a U.S. public company, the Company's inability to raise capital in the United States and the minimal benefits derived from being a U.S. public company, the Board of Directors of the Company determined on April 19, 2012 that it is in the best interest of the Company to voluntarily delist the Company's common stock from AMEX and deregister its shares with U.S. Securities & Exchange Commission (the "SEC"). In connection therewith, the Company notified AMEX on April 20, 2012 of the Company's intention to file a Form 25 - Notification of Removal from Listing and/or Registration under Section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), with the SEC on or about April 30, 2012.

It is expected that the delisting will take effect on or about May 10, 2012. Accordingly, the Company expects that the last day of trading of its common stock on AMEX will be on or about May 10, 2012.

On the effective date of the delisting, the Company plans to file a Form 15 with the SEC to suspend its duty to file reports under Section 15(d) of the Exchange Act. Upon filing of the Form 15, the Company's obligation to file certain reports with the SEC, including reports on Forms 10-K, 10-Q and 8-K, will immediately be suspended.

After the Company has filed the Form 15, its common stock is anticipated to be available for trading on the OTC Pink Sheets, although there can be no assurances that any trading market for the Company's securities will exist, and the liquidity of such trading market may be very limited.

Full Year 2011 Results

• Total revenue was approximately $44.2 million, an increase of 35% from approximately $32.7 million for the year 2010.
• Gross profit as a percentage of revenues was approximately 61.5%, as compared to 65.8 % in 2010.
• Net income attributable to stockholders was approximately $0.1 million, as compared to approximately $1.2 million for the year ended December 31, 2010.
• The stockholder's equity was approximately $2.1 million as of December 31, 2011.

The increase in sales was primarily due to the Company's main product Xuesaitong's sales increasing in Tianjin City, Jiangsu, Guangdong and Yunnan Province as Xuesaitong was listed on the PIC list of Tianjin City since the second half year in 2010 and the Company strengthened sales promotion in the provinces and cities where Xuesaitong was listed on their PIC lists, especially Yunnan Province and Tianjin City. The OTC market also contributed part of increase of revenue as the Company also strengthened the OTC market development in 2011.

Third Quarter 2011 Results

Second Quarter 2011 Highlights

• Total revenue increased to $10.9 million for the second quarter of 2011, representing 58% year-over-year growth.
• Gross margin for the second quarter of 2011 increased to $6.9 million, as compared to approximately $4.4 million for the same period of 2010.
• Net cash provided by operating activities increased to $2.84 million for the six months ended June 30, 2011 from $1.46 million for the same period of 2010.
• Net income (loss) attributable to shareholders increased to $104,325 for the second quarter of 2011 or EPS of $0.01, as compared to net loss of $31,192 for the same period of 2010.

Past Legal Issue:

This delay is due to a pending internal investigation being conducted by the Audit Committee of the Board of Directors (the “Audit Committee”), based on preliminary information received from Hansen, Barnett & Maxwell, P.C., the independent registered public accounting firm of the Company (“HBM”), regarding errors in the accounting for certain sales representative commission advances and trade receivables, the Company’s internal controls, the Company’s personnel involved and related matters. The Audit Committee intends to engage independent counsel to assist in the investigation. The Company currently anticipates completing the investigation and addressing any accounting or other corrective action deemed appropriate, including adjustments to its fiscal periods ended June 30, September 30, and December 31, 2007 and fiscal quarter ended March 31, 2008 results of operations, within the next two months. The Company currently anticipates that, pending conclusion of the investigation, the Company will restate its financial statements for its fiscal periods ended June 30, September 30, and December 31, 2007 and fiscal quarter ended March 31, 2008.

First Quarter 2011 Highlights

• Total revenue increased to $9.4 million for the first quarter of 2011, representing 19% year-over-year growth.
• Net cash provided by operating activities was approximately $2.6 million, an increase of approximately $0.6 million, from approximately $2.0 million for the first quarter ended March 31, 2010.
• Net income attributable to stockholders increased to $99,373, as compared to $2,355 for the first quarter ended March 31, 2010, or EPS of $0.01 vs. nil.

Full Year Results:

• Total revenue was approximately $32.7 million, a decrease of 9% from approximately $36.0 million for the year 2009.
•  Gross profit as a percentage of revenues was approximately 65.8%, as compared to 72.5% in 2009.
•  Net cash provided by operating activities was approximately $5.8 million, an increase of over approximately $3.3 million, or 132%, from approximately $2.5 million for the year ended December 31, 2009.
• Net income attributable to stockholders was approximately $1.2 million, as compared with a net loss of approximately $6.6 million for the year ended December 31, 2009.
• EPS was $0.06 vs $(0.33).
  

GeoTeam Note:

• Fourth quarter 2010 vs. 2009 was $0.02 vs. $(0.01)
• A good portion on 2010 net income was derived from government subsidy income.

Mr. Gui Hua Lan, Chief Executive Officer of China Shenghuo, commented, "Although the sales for the year ended December 31, 2010 decreased by 9% from approximately $36.0 million for the year ended December 31, 2009, we achieved a net income of approximately $1.2 million for the year ended December 31, 2010 as compared to a net loss of approximately $6.6 million for the year ended December 31, 2009. The increase in net income was primarily due to the decrease of selling expenses and general and administrative expenses. In 2011, we will make great efforts to expand the sales of our products and continue to decrease unnecessary expenses.

Our consolidated current liabilities exceeded our consolidated current assets by approximately $15.3 million as of December 31, 2010, and approximately $6.9 million as of December 31, 2009.

As of December 31, 2010, our net accounts and notes receivable (less allowance for doubtful accounts of approximately $2.3 million) were approximately $11.5 million, a decrease of approximately $0.6 million, from approximately $12.1 million (net of allowance for doubtful accounts of approximately $2.1 million) as of December 31, 2009. In order to maintain our existing market and customers and further to expand our sales in the increasingly competitive business environment, the Company decided to allow some of our customers historically with good credit to extend their credit terms, which led to the increase of the accounts receivable. Before 2009, we made significant cash advances to our sales representatives to assist and encourage them to expand the marketing and sales of our products into new markets and to develop new customers. We believed that the sales representatives would be better able to expand into new markets and to secure new customers if they were advanced funds for their travel, meals and other incidental expenses that arose in connection with their sales activities. Prior to September 2006, we did not ask sales representatives to pay off advances immediately because the Chinese economy has grown quickly and because competition in the pharmaceutical industry is intense. Instead, we encouraged sales representatives to expand their markets and gain more customers. However, beginning in September 2006, we began to more vigorously pursue collection of all sales representative advances. Nonetheless, there are some sales representative advances that have aged so significantly that, based on prior experience, we do not expect to collect on every outstanding advance and have estimated the uncollectible balance based on the age of the advances. Pursuant to the policies adopted at the beginning of 2009, instead of advancing sales representatives money to sustain or develop markets, we reimburse sales representatives their selling and marketing expenses when they present expense vouchers. Management considers this a better way to manage the potential for bad debts on the advances to sales representatives. We pay the accrued selling expenses only when we collect an account receivable for which a sales representative has presented his expense receipts. Because we offer a grace period of one to three months to our clients for remitting payments due, the accrued sales expenses may remain outstanding as long as it takes to collect the corresponding accounts receivable.

The completion of Shenghuo Plaza is expected to generate more cash flows and increase our ability to obtain additional financing from banks. Considering the financial resources presently available, we are confident that we have sufficient working capital for our present requirements and for at least the next 12 months. We will continue to make efforts to expand our sales to get more cash flow.

Third Quarter 2010 Financial Highlights

• Total revenues decreased to $8.55 millionfor the third quarter of 2010, representing 19% year-over-year decrease.
  
• Gross margin for the third quarter of 2010 decreased to $5.6 million, as compared to $7.6 millionfor the same period of 2009.
  
• Net cash provided by operating activities increased to $2.24 millionfor the nine months ended September 30, 2010 from $0.88 millionfor the same period of 2009.
  
• Net income attributable to stockholders increased to $787,657 for the third quarter of 2010, as compared to net loss of $31,924 for the same period of 2009.
• EPS was $0.04 vs. break even.

 The decrease in sales was primarily due to our adjustment of the sales commission policy to decrease the commission to sales representatives to offset the pressure resulting from the increase of the price of raw material. The Company will continue to make efforts to promote the sales of our products and control our costs."

The completion of Shenghuo Plaza is expected to generate more cash flows and increase our ability to obtain additional financing from banks. After the completion of Shenghuo Plaza by the end of 2010, we plan to borrow an additional $11.76 million by pledging it.

Considering the financial resources presently available, we are confident that we have sufficient working capital for our present requirements and for at least the next 12 months. This assumes, of which there can be no assurance, that the remaining provinces in which we sell a significant amount of Xuesaitong Soft Capsules will list such capsules in their respective 2010 Provincial Insurance catalogs. We will continue to make efforts to expand our sales to get more cash flow.